THE GLORY DAYS: How Andrew Mason And Groupon Rose To Incredible Heights

Grouponfired Andrew Mason today. How did such a quirky person end up the CEO of a global company in the first place? We tell that story in here, in an excerpt from Business Insider's 2011 e-Book: "Inside Groupon." The full story describes the history of Groupon from its meteoric beginnings to its troubled IPO. It's available for your Kindle. Download your copy today.

On the side, he was doing contract work building databases at a company founded and funded by an entrepreneur named Eric Lefkofsky.

Lefkofsky was already a very rich man, having built several businesses around call centers and the Internet. Mason was an intern, "kind of squatting in their offices," according to one source.

In January 2007, with Lefkofsky's backing, Mason started working on a company — a do-gooder enterprise called The Point.

The Point was a social media platform designed to get groups of people together to solve problems.

The Point was not intended to be a big money-making enterprise, and by one early employee's account, that was fine with most of the staff.

The Point launched in June. It gained modest traction in Chicago, but basically went nowhere.

Every Monday, Lefkofsky, Mason, and a handful of early employees would meet to talk about the Point's progress. One Monday, in the middle of 2008, Lefkofsky raised an idea he thought could revitalize the struggling start-up, based on a campaign he'd seen launched on The Point.

Ordinarily, people used The Point to organize around some sort of cause that might make the world a better place.

But in this case, a group of users decided their cause should be saving money. Their plan was to round up 20 or so people who all wanted to buy the same product and see if they could get a group discount.

"Eric said maybe this is the thing that we do," says a source who was at the meeting. "Maybe we set up a separate page, make it dedicated to group buying."

In his intitial business plan for The Point, Andrew Mason had actually mentionend group-buying as a possibile way the startup could eventually make money. But when Lefkofsky brought it up more than a year later, Mason and The Point's other early executives dismissed the idea. "It didn't seem core to our mission," says the person who was at the meeting.

Through the rest of the summer and early fall of 2008, Lefkofsky would not let that idea go. He'd bring up all the expensive purses his wife and all her friends were buying, and say, "It's crazy! Couldn't they buy 20 of them and get a discount?"

Around this time, the global economy entered free-fall as the sub-prime mortgage crisis exploded and credit markets ground to a halt. Then in September 2008, Lehman Brothers filed for bankruptcy and famous Silicon Valley venture capital firm Sequoia sent out a presentation called "R.I.P. Good Times." Mason and Lefkofsky decided to lay some people off.

"There was this pressure from the market crash [and] looking at our burn rate and revenue — it was time for us to try something to scratch that itch," says a source close to early employees.

Groupon — a side project launched out of desperation by a team of do-gooders who professed no real desire to make big bags of money — was born.

Sources do credit Mason for coming up with some of Groupon's defining characteristics: that it's one deal a day, that the deal doesn't go into effect until enough people buy the voucher, and that the vouchers should be for local businesses.

Some of the characteristics evolved out of a crucial element of Groupon's early DNA; it was a business created by reluctant capitalists.

"[The] way we rationalized it with ourselves," says an early employee, "[was that we were] helping people find interesting things to do in their city."

"Some of the early things we did were an hour in a sleep deprivation tank, or skydiving. We [didn't] want to do stuff that's going to wind up in a landfill. We [didn't] want to sell overstock gadgets. We [didn't] want to deal with shipping and returns."

These reluctant money-makers decided that Groupon should offer one deal a day, and that it should sell vouchers for local businesses. They decided that the daily emails should have funny copy. Mason also pitched Groupon as a way to help local businesses with cash flow at a time when banks were not lending.

The concept immediately took off. Local press got wind of the company and made a lot of noise about it. Employees successfully recruited local business owners among their friends and families to sign up.

"Merchants started to tell us 'if I want to do a 10,000 dedicated email blast on Daily Candy, it's going to cost me X, but you're telling me I can send it to 10,000 people for free, and only if they buy, we'll give you a cut?' That was an eye opener," says one early employee.

By the end of 2008, Andrew Mason and Eric Lefkofsky knew that The Point would become Groupon. In December, Lefkofsky recruited Ted Leonsis, who made his name and fortune building AOL. Leonsis would eventually become Groupon's vice chairman. Lefkofsky's long time business partner, Brad Keywell, also signed on.

Others at the The Point/Groupon didn't see the transition quite so clearly.

"At first we thought it would be a little skunkworks project and we'd go on and it would help us raise money to further develop The Point. But I think that idea didn't last very long because we realized we had a tiger by the tail."

In January 2009, Groupon held its company holiday party at the small apartment of its CTO, Ken Pelletier. He cooked for everyone — the whole company and all their spouses and significant others.

A year later, Groupon had around 300 employees.

A year after that it had 5,000+.

Today, Groupon has more than 10,000 employees.

Investors, some of them who also put money into Facebook, began calling Groupon the fastest growing company in history.

The first major test for the project was its move into a second market: Boston. "In Chicago," explains one early employee, "we had a big network of friends and family to sign up and spread the word. We had a lot of people who knew business owners. It's easier for business owners to trust a local company."

The expansion went off without a hitch — but only thanks to a number of make-it-work hacks on the technical side.

During Groupon's first months, customer support head Joe Harrow would spend three hours every afternoon personally emailing all the customers who bought Groupon vouchers whenever a deal closed.

Nine months in, Groupon switched to software specifically designed for the new business.

Groupon successfully expanded into a third market: New York. By this time, says an employee, "we kind of had the playbook we needed to open in another city, another city, another city." Groupon knew, for example, exactly how much to invest in advertising in order to build a sizable subscriber list in a new market.

By the summer of 2009, Lefkofsky started pushing hard for growth in Groupon's Monday meetings.

He started by suggesting Groupon be in five cities by the end of the year.

Then he started pushing for 10 cities by the end of the year.

Finally, according to a source familiar with those meetings, Lefkofsky just started saying, "Why don't we try and go as fast as we can? Why don't we turn up the jets?"

"We realized the main barrier to entry is going to be scale. So we wanted to get to as many cities as we can because we saw direct, outright, verbatim copies of what we were doing, popping up all over the place pretty quickly. We said we can either go chase them and beat them back and fight them legally, or race ahead and do what we do, as best we can. So the choice was to not look back, and try to be better and bigger."

One source close to Groupon's board says it was director Peter Barris of Groupon investor NEA that came up with the original analysis behind this aggressive growth plan.

Groupon began to grow into a real startup with lots of employees. It hired a COO who had worked at Yahoo and sold his own company before: Rob Solomon.

By this time, not only were consumers noticing Groupon, the press was catching on too. Mason went on CNBC. He went on "The Today Show." In August 2010, Forbes magazine put Mason on its cover. His shirt is un-tucked. He's shrugging as if to say, who me? The cover reads: "Groupon Is The Fastest-Growing Company … Ever: The New Web Phenom."

Groupon developed a "typical startup culture," with "everyone in their hoodies, and sales reps dating each other — that kind of nonsense," says one early employee." It was sort of like a fraternity that worked very hard."

"Working there was crazy," says another early employee. "[From 2009 to 2010] we hired 10,000 people. That was completely insane — something that's never happened before, and should never happen again. We ended up in 45 countries in 16 months. It was nuts, it was fun, it was a blast."

SO, WHO IS ANDREW MASON, ANYWAY?

Andrew Mason — with his mild brown hair, scruffy beard, and faded polo shirts — is funny in a way that most CEOs would be afraid to be.

Even as he went on Groupon's road show in 2011 in order to ask major institutional investors to trust him with hundreds of millions of dollars, his Twitter avatar — his public face to the world — remained a picture of him on his knees, in his underwear, gleefully unwrapping a Nintendo Wii.

Once, we emailed Mason for a comment on a story, and he replied in minutes: "You can say that I totally was going to comment except the way you asked for my comment suggested that maybe I shouldn't and I didn't want to let you down so decided not to comment."

When we asked him what it was like being around so many famous, rich people, he replied: "Have u seen Eyes Wide Shut? Nuff said."

When we told Mason a quote like that could make for a good headline, Mason replied, "haha... man that would be so good. Unfortunately my commitment to our business is still marginally higher than my commitment to fucking around."

On CNBC, a reporter once asked Mason if he really owned 20 cats, as he'd previously told another reporter. Mason said no.

"Most CEOs will make stuff up about themselves to sound way smarter and cooler and people are disappointed to find out otherwise. I decided to set the bar very low and make up lies about myself that make me sound lame."

This wacky, always-making-jokes version of Andrew Mason is the one outsiders know. Sometimes we see a more serious, self-reflective side of Mason — the one who started The Point, and now admits he's surprised to see himself in the role of capitalist.

How do these versions of Andrew jibe with the one supporting the Samwer brothers' hardball business tactics? How is he also the leader of a business that is already doing more than $1 billion of revenue a year?

Mason grew up in Mount Lebanon, a Pittsburgh suburb. When he was 15, he started Bagel Express, a Saturday morning food delivery service. He moved to the Chicago area after high school to go to college at Northwestern. He majored in music. Then he started working on a Masters in public policy. To make some money, he did contract web design for Lefkofsky.

When hiring people for The Point, Mason struck recruits as young — but very smart. Still, one early employee told us that if it weren't for Lefkofsky's backing, he never would have joined The Point.

For a while, Mason's age and inexperience showed. Always interested in Groupon's product and the customer experience, he wasn't exactly passionate about the nuts and bolts of running a business.

Says one source close to the Groupon board: "Three years ago if you had said to Andrew, this is really important for you to master — where the money is made, know how many employees you have, know the best way to onboard and recruit and terminate employees — he probably would have said, yeah, I know. But deep in his heart of hearts, I don't think he would have meant it or internalized it."

To help Mason with the nitty gritty — helping him to understand it, and to understand why it's important — Lefkofsky, the Groupon board, and Mason himself have sought out mentors across the industry for Mason to be in regular touch with.

Mason is in particularly close contact with Marc Andreessen, the Netscape cofounder who's developed a second, very rich career as a Silicon Valley investor and entrepreneur coach to CEOs like Mason and Facebook's Mark Zuckerberg.

The other hard transition Mason had to make was from do-gooder founder of The Point to Groupon capitalist.

Mason and other early Groupon employees have come up with some pretty good rationalizations for Groupon and how it helps the world. They like to say it gets people to try new things and that it gets small businesses cash flow.

But most sources close to Mason and Groupon agree that he made the transition into business life quite easily.

One source says that after he joined Groupon, he learned that Mason "is more of a businessman than I ever would have guessed."

"He just likes to be the wacky, quirky, irreverent, 'I don't care about money, I don't care about business.' It's bullshit. It's just a shtick. He started as a socialist, and now he's as capitalist as you get. He wants to build a really big special company and he wants to fly private jets," says another source who worked closely with Groupon and Mason.

Mason jokes with the press, this source says, because "he wanted to be a performing artist at some point in his life, and he was granted a stage to do that and he went for it."

Another source says Mason "still wears grungy old band t-shirts and hoodies and disgusting flip-flops" and doesn't seem like he's "turning into this snazzy, d-baggy CEO kind of guy."

But this source says Mason definitely "cares about making money."

"There's no way anybody would commit this much of his life and time and stress to this if he didn't care about making money."

He cares about money because it is "validation that he is smart, he can do this. "

Mason can turn against people.

"I remember one person, who's still there, at some point was like, heads down working like a crazy person, super serious and not able to crack a joke for a few weeks and I was like, 'what the hell is up with you,' and he was like, 'I'm in Andrew's dog house and I'm working my way back out, don't talk to me for a month.' There's a little bit of that and once I heard that, I was like, oh fair enough, see you in a month. So, yeah, it's a trait of his."

"He's a total hardass," says another source. "He gives no recognition at all. He's very hard to approach. He always has a furrowed brow. He always has headphones on. Everything is through e-mail. His free-wheeling funny guy image is something he turns on very effectively when it's required, but it's not him. He's very arrogant, he's stubborn. He honestly believes he's smarter than everybody else."

Not everyone takes Mason's aloofness so personally.

"Does he think he's smarter than most people? Yes. Is he? Yes."

Some Groupon employees appreciate his stubborn streak.

One time Groupon's business development team managed to land an offer with a "national entertainment brand" that would have broken Groupon into a whole new market segment, but because the deal wasn't great for Groupon subscribers, Mason squashed it — despite protests from "most of the C-level people."

"Andrew was listening to all these guys explain to him how this was going to be such a big deal, and he stopped everybody and was like, 'you mean to tell me we're going to do a deal where we offer x, y, and z, and you're excited about that? That's a stupid deal, I wouldn't buy that? Would you buy that?' And everyone looked around and he was like, 'we're not doing that deal.'"

"He had a really consistent vision of what he wanted Groupon to be and he didn't compromise that even when there were big financial stakes. He's kind of no bullshit and tells it like it is."

A source close to the Groupon board describes Mason as "thoughtful," and "charmingly goofy." He says that Mason is learning to become "a fully developed founder/CEO," one that "provides the vision, the soul, the power-plant for the company to continue to innovate and do great things and grow."

This is an excerpt from Business Insider's 2011 e-Book: "Inside Groupon." The full story describes the history of Groupon from its meteoric beginnings to its troubled IPO. It's available for your Kindle. Download your copy today.